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The National Association of Realtors’ Insurance Woes – What It Means For Home-buyers and Sellers
The National Association of Realtors (NAR), the largest real estate association in the country, has run out of liability insurance coverage. Their provider, Chubb, has declined to renew their policy. This likely due to the increasing number of lawsuits that NAR is facing.
As more lawsuits pile up, NAR and other defendants may soon run out of money to continue fighting them or settling them. Many speculate that NAR will have to settle rather than engage in lengthy court battles. What does this mean for real estate agents and their clients though?
For buyers, it likely means lower commissions for agents in the future. Without NAR’s support and resources, commissions could disappear entirely in some cases. Most brokerages have already settled lawsuits separately from NAR, leaving the association as the last line of defense for many agents. However, with NAR’s dwindling ability to fight lawsuits, agents are vulnerable.
That said, sellers will likely still pay commissions on home sales because it is in their best interest to have an agent market their home. However, commissions will probably be negotiated more frequently. On certain types of deals, like FHA loans, a portion of the seller concession may go towards the buyer’s agent commission.
Another possible outcome is that buyers will not have representation at all. Instead, they may rely on their mortgage loan officers for guidance through transactions. This puts loan officers in risky legal territory and buyers receive subpar advice from someone whose top priority is not real estate.
Amidst the NAR news, mortgage rates recently hit a two-month high while the stock market rallies. However, new construction is at its lowest point since 2020, which will constrict inventory. More positively, the number of listings is up 7.9% from last year and over 20% of listings have seen price reductions.
The good news is that 46.1% of homeowners have at least 50% equity in their homes. While values have dropped and more concessions are being made, there is still ample equity available. Agents should develop strategies to show clients how they can leverage equity through cash-out refinances to upgrade their home or invest in new properties. Less than half of these “equity rich” owners seem to know these options are available.
So while NAR flounders, agents must double down on protecting their clients’ interests. This includes pursuing negotiated commissions and educating homeowners on how to fully capitalize on record equity. By providing this guidance, agents can demonstrate their value, even with their national association in dire straits.
